Instruments and monetization.
Bank issued paper, and the financing that can honestly be raised against it.
This is the corner of the market with the most fraud in it, so this page is blunter than the rest. Everything below is real, and several claims commonly made about these instruments are not. Where that is the case, it is stated.
Standby letters of credit
An SBLC is a bank undertaking to pay the beneficiary if the applicant fails to perform. It is a contingent credit instrument: a backstop that pays on a compliant demand, not a pot of money sitting ready to be drawn.
- Issued under ICC rules, typically ISP98 or UCP 600
- Delivered by SWIFT MT760 and verified bank to bank
- Secured by the applicant at issuance, as capital rules require
- Issued by banks, never by brokers or intermediaries
Bank guarantees
Close cousin to the SBLC and often interchangeable commercially. Demand guarantees are governed by the ICC Uniform Rules for Demand Guarantees, URDG 758, and are payable against a complying demand.
- Performance, advance payment, and payment guarantees
- Governed by URDG 758 where the parties adopt it
- Terms drawn so a demand can actually be made if needed
Monetization
Raising finance against an instrument you hold, by pledging it as collateral for a facility. Done properly it is lending secured on paper, which means conservative advance rates, a real underlying transaction, and a lender that satisfies itself on the issuer first.
- Advance rates are partial and conservative, never near face value
- The issuing bank is assessed before the document is
- A credible use of proceeds is required, not optional
- Terms quoted in writing, with no fee payable beforehand
Medium term notes
Debt securities issued under a programme that lets an issuer come to market in tranches over time rather than raising the whole amount at once. Maturities commonly run from well under a year to several decades.
- Programme documentation and dealer arrangements
- Continuous issuance in tranches as funding is needed
- Coupon and tenor structured to the issuer profile
Bank drafts and surety bonds
A bank draft is drawn on the bank itself rather than on a customer account. A surety bond is an insurer or surety guaranteeing that a principal performs an obligation, and it sits closer to insurance than to banking.
- Draft authenticity verified with the drawee bank directly
- Surety capacity confirmed with the underwriter
- Obligation and trigger events documented before issue
Safekeeping receipts
An SKR evidences that a custodian holds a specific asset for a named owner, whether that is bullion, property title, art, or gems. It proves custody. It does not by itself prove value, and it is not a payment instrument.
- Independent valuation of the underlying asset
- Custodian standing verified before the receipt is relied on
- Ownership and any prior charges confirmed
Gold certificates
A certificate evidencing a holding of gold with a custodian. Whether it represents allocated metal or an unallocated claim changes what it is worth in a stress, and we establish which one before anything is built on it.
- Allocated holdings identified by bar and serial number
- Custodian and vault verified independently
- Refiner accreditation confirmed against LBMA listings
Credit enhancement
Using a stronger party's standing to improve how a counterparty views your obligation, so a transaction can proceed on better terms. It strengthens a credit profile. It does not put cash on your balance sheet, and any structure presented as doing both deserves scrutiny.
- Improves the terms a counterparty will offer
- Instrument sized to the underlying obligation
- Cost and collateral treatment disclosed up front
Several claims circulate constantly in this market and none of them hold. That a bank will issue an instrument with no underlying transaction purely to create liquidity. That a non bank provider can issue a standby. That monetization returns a figure close to face value. ICC guidance flags all three as recurring patterns in instrument fraud, and any large upfront commitment or due diligence fee demanded before written terms is the clearest warning sign of all. We charge no fee before terms are issued.
Not sure which of these you need?
Describe the outcome rather than the product. We will tell you which route fits, or that none of them do.
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